Employer's financial position not relevant in termination pay


An employer’s financial position should not be a consideration in determining termination pay, says employment and education lawyer Sheila MacKinnon.

“You don’t look at the circumstances of the employer, but the circumstances of the employee,” says MacKinnon, managing partner of Shibley Righton LLP’s Windsor office.

An Ontario Court of Appeal ruling involving teachers at a King City, Ont. private school underscored that fact in Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801.

Three teachers who were employed on a series of one-year contracts for several years launched a wrongful dismissal lawsuit that proceeded on a motion for summary judgment after the school failed to pay them in lieu of notice.

“The respondent argued that the appellants were not entitled to notice because they were employed pursuant to fixed-term contracts,” the decision reads. “However, the motion judge found that the appellants were employed for indefinite periods and were entitled to reasonable notice.”

The motion judge reduced the 12-month notice period proposed by the appellants to six months after taking into account the respondent’s financial position and the availability of alternative teaching positions, the decision says.

But the appeal court eventually found that the motion judge “erred in considering an employer’s financial circumstances as part of the ‘character of the employment.’”

The panel wrote: “An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.”

MacKinnon, who was not involved in the case and comments generally, says the appeal court ruling is consistent with the law.

“When an employer dismisses an employee without cause – which they are entitled to do – they must give them reasonable notice,” she tells

“Some people are under the mistaken impression that it’s almost like double dipping,” she says. For example, the employee may be able to collect termination pay while being employed at a new job.

But the purpose of termination pay is to take into consideration how long someone might reasonably be unemployed based on various factors, she says.

“The idea is you may not be able to get a job within a certain amount of time based on your age, the seniority of the position that you had and the level of pay you received,” she says.

In the tough Windsor job market, for instance, it may take longer for private school teachers to find jobs, MacKinnon adds.

“We have the highest unemployment rate in Ontario in certain fields. All of that goes into trying to come up with this magic number of how many months or weeks is appropriate notice to give to the employee – because in essence, they are entitled to have their income and benefits basically replaced for that period if they were dismissed without notice.”

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